How combinations of control elements create tensions and how these can be managed: An embedded case study

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Abstract

This paper explores how combinations of management control (MC) elements can create tensions, and what supervisors can do to manage these tensions. We extend the literature on the interplay of MC elements by examining the underlying micro-processes that give rise to tensions between MC elements. Specifically, drawing on both the MC and the organization literature, we investigate how interactions between MC elements can simultaneously enhance and diminish control effectiveness, for which we coin the term tension complexity, and how these tensions can change over time, which we label tension dynamics. We empirically inform our study with an embedded case study in a public sector organization in the Netherlands. Using interviews, desk research, and observations, this study specifically investigates how an organization-level MC element (the value ‘self-management’) relates to departmental MC elements, creating tensions. The findings highlight that tensions, because of their dynamic and complex nature, require continuous attention from managers. Furthermore, the case findings demonstrate how department managers can influence the tensions by affecting the balance, balance tendency, and intensity of the MC elements within them. We conclude by providing suggestions for further research into the interactions of MC elements.

Introduction

Management control (MC) elements such as organizational values, performance measures, and rules can be used to serve various purposes, including the communication and implementation of strategy (Simons, 2000; Wouters and Roijmans, 2011). Given that they are often used in combination (Friis et al., 2015), it is important to recognize that some MC elements interact and affect each other’s outcomes. As a consequence, the simultaneous use of several MC elements produces control outcomes that differ from the sum of the control outcomes of the individual MC elements (see e.g. Bedford et al., 2016). Various authors have emphasized the importance of examining interactions of MC elements, and have identified for instance complementary effects of certain combinations of MC elements (e.g. Van Veen-Dirks, 2006; Widener, 2007; Grabner and Moers, 2013; Friis et al., 2015). This stream of literature is primarily concerned with the aggregate effect of interactions among MC elements in terms of being positive (complementarity), negative (substitution), or non-existent. However, what has been left largely unexplored are the inner workings of combinations of MC elements and how and why control combinations generate positive or negative effects on control outcomes. The aim of our study is to enhance the understanding of the underlying processes that create such effects by examining the relationships between MC elements.

Some empirical studies in the MC literature have also used the notion of dynamic tensions to examine control interrelations (e.g. Henri, 2006; Mundy, 2010). These studies argue that different MC elements (e.g. boundary/belief systems or diagnostic/interactive control systems, see also Simons, 1995) are in tension and need to be balanced to achieve effective control (Simons, 2000; Mundy, 2010; Tessier and Otley, 2012; Kruis et al., 2016). However, this balancing act is a challenge for managers. An issue of particular relevance here is that the literature is often unclear as to what such balancing acts entail. Indeed, the MC literature on tensions has been criticized for using tension-related terms too loosely (Lövstål and Jontoft, 2017). We aim to clarify conceptual and empirical issues related to the notion of tensions, for instance by specifying what it means for a tension to be dynamic or complex.

In order to define tension complexity, we draw on the concept of complementarity (indicating a positive effect of a control combination), and the concept of competition (indicating a negative effect of a control combination).1 Tension complexity is used to indicate that a certain control combination generates both complementary and competitive effects simultaneously. As Lewis (2000, p. 760) notes, tensions can have both positive and negative aggregate effects on organizational outcomes since they can “both hamper and encourage organizational development”. By recognizing that tensions involve both positive and negative effects (i.e. tension complexity) and that they can change over time (i.e. tension dynamics), one will be better placed to do justice to the complex and dynamic nature of tensions in practice.

We also draw on the literature on paradoxes and tensions (cf. Poole and Van de Ven, 1989; English, 2001; Smith and Lewis, 2011; Epstein et al., 2015; Miron-Spektor et al., 2018; Lewis et al., 2019). Schad et al. (2016) observe that the Western philosophical foundations of paradox emerged from the ancient Greeks, as reflected in the terms para (contrary to) and doxa (opinion). Accordingly, in the management literature, a paradox can be defined as a “persistent contradiction between interdependent elements” (Schad et al., 2016, p. 10). Lewis et al. (2019) used the notions of paradoxes and tensions in the field of MC and highlighted their potential to theoretically contribute to the MC literature. Our paper explores the underlying processes that create tensions, focusing specifically on the capacity of a tension to produce both positive (complementarity of MC elements) and negative effects (competition among MC elements) simultaneously. We do so theoretically by mobilizing the organization literature on tensions and paradoxes, and empirically by conducting an embedded case study. In the case study, we examine how an organization-level MC element (i.e. the value of self-management) relates to MC elements employed at the department level, and how managers can balance the use of the elements in the tension.

Our study offers three main contributions to the management accounting and control literature. First, we contribute to the literature on interrelationships among MC elements by conceptually clarifying the notion of tensions. We develop an understanding of tensions as being relations that can involve positive (complementary) and negative (competition) effects simultaneously (tension complexity) and can change over time (tension dynamics). Second, we mobilize the organization literature to theorize on why tensions that involve complementarity and competition may emerge, and we distinguish balance, balance tendency, and intensity as key characteristics of a tension. In so doing, we extend the MC literature that draws on complementarity theory by exploring the micro-processes that underlie these effects, while relying on the literature on paradoxical tensions (see, e.g., Poole and Van de Ven, 1989; Lewis, 2000; English, 2001; Smith and Lewis, 2011; Epstein et al., 2015; Lewis et al., 2019). Third, we show the ongoing need for managers to engage in a balancing act because internal and external forces continuously shape and influence the balance between the elements in a tension. In this regard, insights into how managers deal with tension dynamics and complexity can provide a basis for considering various strategies that managers might use to balance tensions. We empirically inform our theoretical developments with a detailed empirical narrative about an embedded case study that illustrates what complex and dynamic tensions are, how they can emerge, how managers can balance the tensions, and what their effects can be.

In the next section, we examine the literature on relationships among MC elements, and further develop the notion of dynamic tensions. Furthermore, we draw on the organization literature to identify key characteristics of tensions, how and why tensions may emerge, and their potential consequences. Section three provides a description of the research methods, and in section four we present our embedded case study that examines tensions in a Dutch public sector organization. Section five discusses the findings in the light of the present literature, followed by conclusions and implications for theory and practice in section six.

Section snippets

Theory

To theoretically inform our study of the underlying processes that create tensions, we draw on the literature on tensions. First, we discuss how the accounting and control literature has used tension-related terms, after which we will further develop the notion of tensions while drawing on the organization literature.

Methodology

A case study method is considered appropriate for exploring the interplay between MC elements and developing the notion of dynamic tensions (Ahrens and Dent, 1998; Otley and Berry, 1994). By studying an embedded case, we are able to examine the dynamics between various MC elements employed on different hierarchical levels and study their “combined effects” on those who are subjected to the MC elements (Van der Kolk, 2019, p. 516). We investigate the MC elements and their interrelationships in

Dutch municipalities, Bluetown, and the TNO program

Municipalities in the Netherlands are the “most important and visible level of sub-national government” (van Hengel et al., 2014, p. 55). They have autonomous power and carry out various activities that directly affect local residents. For instance, youth care, issuance of passports, maintenance of roads and public buildings, and waste collection are part of every municipality’s tasks and responsibilities (cf. Van der Kolk et al., 2019). The political responsibility for the activities at

Discussion

Drawing on the MC and organizational literature on tensions, this paper has examined the relationships between MC elements and explored the inner workings of control combinations. Whereas previous research has tended to focus on the aggregate effects of control combinations, we pay particular attention to the complexity and dynamics of combinations of MC elements. We explore the underlying processes that create tensions between MC elements and how and why these tensions generate positive or

Conclusions

We extend the literature on interactions among MC elements by examining the inner workings of tensions, and by investigating what managers do to balance these tensions. Our study makes three main contributions to the literature. First, we have clarified and deepened the notion of tensions by highlighting that they simultaneously involve complementarity and competition among elements (tension complexity) and that they can change over time (tension dynamics). This understanding of tensions as

Funding

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Acknowledgements

We thank Matthew Hall, Wim van der Stede, Bob Scapens, Jan van Helden, Sally Widener, Brendan O’Dwyer, Utz Schäfer, Marko Reimer, Teemu Malmi, Juhani Vaivio, Ivar Friis, Allan Hansen, Sophie Hoozée, Breda Sweeney, Henri Dekker and the two anonymous reviewers for their constructive comments on earlier versions of this paper. Earlier versions of this paper were presented at the 10th EIASM New Directions in Management Accounting conference, the 8th EIASM Public Sector conference, and research

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